MCX-SX: 10 must-know facts about India's newest stock exchange

MCX-SX, India's new kid on the equities and equity derivatives trading block, debuted today. Promoted by Jignesh Shah, who is also the promoter of Multi-Commodity Exchange and Financial Technologies (India) Ltd, MCX-SX is India's third national stock exchange after the Bombay Stock Exchange and the National Stock Exchange.

Here are 10 facts about India's newest stock exchange:

MCX-SX started trading in the shares of 1,116 listed companies compared to 1,665 firms on the National Stock Exchange and 5,191 companies on the Bombay Stock Exchange.

The MCX-SX benchmark index - christened SX40 - is equivalent to the BSE Sensex and the NSE Nifty. The SX-40 index is designed to measure the economic performance with better representation of various industries and sectors based on ICB, a leading global classification from Britain's FTSE-100.

The SX40 is a free float (shares that are readily available for trading) based index of 40 large-cap and liquid stocks. It includes companies that have a minimum free float of 10 per cent and are within the top 100 liquid companies. Globally, Britain's FTSE has a 25 per cent free float criterion while the US S&P 500 has a 50 per cent free float criterion.

The weight of the largest constituent on the SX-40 is 9.4 per cent as compared to 8.8 per cent (ITC) on the Nifty and 10.3 per cent (ITC) on the Sensex. The top 10 stocks account for a 62.4 per cent weightage on the SX-40 as compared to 57.4 per cent on the Nifty and 67.8 per cent on the Sensex.

The base value of the SX-40 is 10,000 and its base date is March 31, 2010. The SX-40 has given returns of 16.3 per cent from 2010-January 31, 2013, against 15 per cent on the Nifty and 13.5 per cent on the Sensex.

The SX-40 has an industry cap at 20 per cent (+/- 2 per cent band). This means stocks from a particular industry cannot have over 20 per cent weightage in the index. There is no industrial cap in the composition of the Nifty.

MCX-SX is in direct competition with the NSE, India's biggest stock exchange by volumes and turnover, and the BSE, which is India's oldest bourse. To take on the two, MCX-SX offered a 50 per cent discount on transaction charges to new members, attracting many proprietary derivative traders. Of the 700 membership applications received by MCX-SX, 405 applications have been already registered with market regulator SEBI.

Key challenges: Stock exchanges thrive on volumes and MCX-SX hopes that volumes will grow substantially in the coming years. The value of shares traded in India remain a fraction of global exchanges, but the government's recent initiatives to boost mutual fund and insurance investments in a bid to bring more retail investors into the stock markets will help MCX-SX.